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Recent law enforcement and regulatory developments demonstrate the FTC’s efforts to put the brakes on deceptive add-ons in the car buying process. How pervasive has the problem been at three Texas dealerships owned by Asbury Automotive Group? According to an FTC complaint, of consumers who were charged for at least one add-on at Asbury’s McDavid Ford Ft. Worth, McDavid Honda Frisco, and McDavid Honda Irving, a study shows that between 58% and 75% of them were charged for at least one add-on they didn’t agree to buy or were falsely told was a required purchase. These unwanted add-ons, the complaint alleges, can cost consumers hundreds or even thousands of dollars per transaction. What’s more, the FTC says that the respondents discriminated against Black and Latino consumers by charging them more for those add-ons than other consumers.

The complaint, which names Asbury Automotive Group, the three Dallas-area dealerships, and General Manager Ali Benli, outlines the sales practices the FTC alleges violate the FTC Act and the Equal Credit Opportunity Act. According to the lawsuit, the respondents have tacked on an array of unauthorized add-ons – for example, charges for chemical coatings, maintenance plans, extended warranties, and dent protection – to the purchase price of vehicles. The FTC says that in many cases, the respondents simply sneak the add-ons past buyers without their consent.

You’ll want to read the complaint for details, but the FTC calls particular attention to a practice allegedly inflicted on unsuspecting car buyers called “payment packing.” Here’s how it works:

“One tactic Respondents use is getting a consumer to agree to a monthly payment that exceeds what they need to pay under the contract to purchase a vehicle, and then ‘packing’ the sales contract with add-on charges to make up the difference. For example, a salesperson might represent that a consumer qualifies for financing with a monthly payment of $400, when the monthly payment for the vehicle under the contract is actually $350. The salesperson then includes, or ‘packs,’ the contract with add-ons to make up some or all of the difference between the two monthly payments, so that it appears the consumer is receiving a similar or smaller monthly payment.”

The complaint also cites the example of a consumer who was reportedly shown on an electronic device only the places on the sales contract he needed to sign. It wasn’t until three weeks later that he learned the finance manager had added a $1,750 maintenance package and $609 key replacement package without his consent. Other consumers allege that sales people changed the terms of their loans from a 72-month to an 84-month term, masking hidden add-on charges and even increases in the sales price.

According to the FTC, in other instances, the respondents falsely represented optional add-ons as mandatory purchases. As the complaint alleges, one sales person told a consumer that to finance the purchase of a truck, “he had to purchase a bundle of add-ons – including a maintenance plan, chemical protection and warranty, windshield, extended vehicle warranty, and key replacement service” – add-ons that added up to more than $9,500.

Isolated episodes? No, says the FTC. According to the complaint, the misconduct was widespread: “Under the policies set by Asbury, employees receive additional compensation for add-on charges, including bonuses that managers earn when a certain percentage of the dealer’s sales include an add-on.”

The FTC also alleges the respondents have violated the Equal Credit Opportunity Act in their financing practices by discriminating against Black and Latino applicants and imposing higher costs on them than on similarly situated non-Latino White applicants. According to the complaint:

• McDavid Fort Worth charges Latino consumers, on average, approximately $169 more for the same add-ons than non-Latino White consumers.
• McDavid Honda Frisco charges Black consumers, on average, $298 more for the same add-ons, and charges Latino consumers, on average, $214 more for the same add-ons, than non-Latino White consumers.
• McDavid Honda Irving charges Black consumers, on average, $268 more for the same add-ons, and charges Latino consumers, on average, $217 more for the same addons, than non-Latino White consumers.

The FTC says these disparities “are statistically significant even when accounting for other factors that could affect the cost of add-ons” and that “[n]o legitimate, nondiscriminatory reasons exist for the Respondents charging higher prices for the same or similar add-ons to Black and Latino consumers than to similarly situated non-Latino White consumers.”

The complaint alleges the respondents included charges on sales contracts that consumers didn’t authorize, made misrepresentations about add-ons, charged consumers without their express informed consent, and violated the Equal Credit Opportunity Act. The matter is pending before an Administrative Law Judge.

Even at this early stage, the case demonstrates the FTC’s commitment to protecting car buyers from paying for add-ons they didn’t want, challenging other deceptive and unfair conduct in the car buying process, and fighting back against discriminatory financing practices.